Driveway Hits The Road

Driveway, one of several companies competing in the online storage space, sent out an email to users last night informing them that it would be discontinuing its consumer services, effective March 5, 2001.

Representatives from the company did not return SiliconValley.internet.com's request for comment by press time, but a release put out by the San Francisco-based company Wednesday morning says it will be repositioning itself as a technology platform provider.

In other words, the company has learned that free services don't pay anymore.

Despite a growth rate of more than 20,000 users a day, and over $62 million in funding from big name investors like Lycos and Chase Capital Partners, Driveway's primary revenue model previously focused on advertising, a model that has killed its share of dotcoms over the last several months. Users at the site received 30 free megabytes of storage just for signing up, for example, but were required to fill out a bevy of surveys (to enable targeted advertising) in order to get an additional 70 MB.

Nonetheless, the total 100 MB was still free, attracting over 6 million registered users to the company, all of who will need to start looking elsewhere. Driveway's site recommends signing up with Chicago, IL-based competitor FreeDrive, but representatives from that company were also unavailable for comment.

Founded in 1999, Driveway pulled out from a $75 million IPO in June last year. At the time the company had more than 40 competitors (diskonnet, filegenie, freedrive, i-drive.com, idrop, myspace, netdrive, netfloppy, swapdrive and xdrive, to name a few).

"I suspect less than half a dozen [data storage companies] will emerge," predicted Larry Jones, VP of product marketing at Driveway, shortly after the pullout.

Looks like Driveway won't be one of them, at least not under the same model it followed when Jones made his initial comment.

"Effective immediately, Driveway is no longer accepting new user registrations, file uploads or purchases of additional space," reads the company email. "After March 5th, 2001, you will no longer be able to access any files stored at Driveway.com."

Tim Craycroft, CEO of competitor i-drive, isn't surprised by Driveway's move to an enterprise-level strategy. San Francisco-based i-drive's initial focus was on developing storage partnerships with a diverse range of organizations, including deals with over 35 universities nationwide and popular online music plays like MP3.com. In recent months, however, the company has moved to free itself from the infrastructure game, focusing instead on licensing the software behind the storage space.

"Everyone in our space has realized that giving this away for free is simply not viable," says Craycroft. "All of us are also coming to the conclusion that carrying the burden of hosting the infrastructure, even if you're private labeling that for paying enterprises, is a tremendous risk. So you're seeing many of the companies in this space announcing more of a focus on becoming a software company and working with large infrastructure providers (like telcos) who have the economies of scale on the hardware and vendor side."